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Editorial:

Clear analysis is a start

Zapatero's economic report details necessary reforms. Now, to carry them out

The prime minister has just presented his annual economic report. This continues a tradition of some years running, which seemed a promising one, insofar as it imitated similar traditions in longer-standing democracies.

But the contents of the report, generally too complacent, have from the first moment shown an obstinate blindness to a reality that repeatedly showed up the problems of the Spanish economy. This is now clear to see.

The negative evolution of the crisis is what has done most to discredit these reports. The government was far too slow in admitting the severity of the economic and financial collapse, though the quick spread of the contagion was already apparent in the euro zone and in the Spanish economy itself, only a few weeks after the crisis began in earnest in the summer of 2007. In this yearly report, the description of reality has never had much to do with what has been experienced by Spanish companies, especially small and midsized ones- which are chiefly responsible for the creation of jobs- and by the workers who have swollen the greatest contingent of unemployed in any advanced economy.

This year's report, presented on Tuesday, will surely not help to strengthen confidence among national and international economic agents. It seems to form part of a kind of marketing plan, conceived as a way of bringing together prominent personalities, as already occurred in the meeting with the country's business leaders some weeks ago.

This sales talk conveys no clear message other than a series of self-justifications and palliative measures for what is now admitted to be a very grave situation. Obviously it is easier to bring together a room full of outstanding business figures than it is to settle on specific decisions and agreements that might contain the most serious deterioration of Spanish living standards in recent decades.

The report admits the "structural weaknesses" of the Spanish economy, some of which were already perfectly identified in the Socialist Party's electoral program before it came to power in 2004. The line now being taken, centered on the "austerity-reforms-social cohesion" axis, is the result of external pressure in the context of the ongoing crisis in the public debt markets. A crisis that inflicts on the Spanish Treasury a differential punishment in its financing costs. The aversion to risk is high, and confidence in the possibility that the complex situation can be turned around is ever weaker.

It is never too late to spell out the much-talked-of reforms in specific terms, but it will require some political adroitness to accomplish this without further exasperating those who are paying the crisis' heaviest costs. Zapatero has to govern, and this includes the reforms of pensions, of the labor market, of banking regulation, and of governing institutions themselves. But these reforms, among which the pension bill is now the outstanding priority, had best be carried out rapidly, and without doing too much damage to confidence- that of the public, and that of the markets. This depends not so much on budget headings as on political skill.